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Opinion: Oil severance tax would cost jobs in California

With more than 2 million people already out of work and our state’s unemployment rate consistently above the national average, we should be doing everything we can to save jobs and encourage business investment in California. But two oil severance tax proposals making their way through the Legislature would do just the opposite.

AB 1604 (Nava) and AB 656 (Torrico) would kill almost 10,000 jobs and further undermine California’s competitiveness at the worst possible time. It’s hard to fathom what the authors of these bills are thinking.

Promoters of these taxes like to claim that of the10 major oil producing states California is the only one that does not levy a severance tax. What they neglect to mention is that sales taxes and corporate income tax rates in California are the highest of the states considered.

On a total tax collection basis, taxes on oil production in California puts us in the middle of oil producing states. The severance taxes being considered would cause California to become the state with the heaviest tax burden on oil production.

Currently, California has just three sources of crude oil to meet our needs of about 1.8 million barrels a day. We produce about 600,000 barrels of oil every day right here in California from some 50,000 wells. Another 214,000 barrels per day comes here in ships from Alaska. And another 870,000 barrels per day – almost half of all the oil we use – comes here in ships from foreign countries.

A tax increase on oil production will surely increase the amount of oil we import from foreign countries, many of them hostile to the United States. A tax increase will make it harder and more costly for energy firms to operate in California. And it will make energy for all residents – consumers and businesses alike – more costly.

As Vice President of Business Development for a firm that provides engineering, information technology, and professional personnel to a wide range of industrial clients on the West Coast, I meet frequently with the men and women who run those facilities.

During one recent meeting, a manager looked me squarely in the eye, snapped his fingers, and said, “If this place were on wheels, we’d be out of here in an instance.”

He was talking about California’s business climate and its growing hostility to businesses and the jobs they provide. The direction California is going in terms of taxes and regulation have created an uneven playing field that makes it tough to convince private industries to invest their capital in a state that virtually guarantees the lowest return on their invested capital.

California has implemented the strongest environmental regulations in the world and we have all benefited from them. But make no mistake – those regulations also are a 40 pound rock on the back of business investment that has driven away businesses and jobs from California. Every new tax is just another rock in the growing mountain of costs that more and more companies are finding impossible to carry.

Taxes like AB 1604 and AB 656 are just one more example of California’s growing image of being an unwelcoming place for business to grow and thrive. This uneven playing field makes it tough to convince private industry to invest its capital in California.

Energy companies are not required to drill for oil in California, nor are they required to process refined products such as gasoline, diesel, and chemicals in California for our daily use.


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